Go to Prison for the Crime, Come Back for the Diet and Rest

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Hermon Prison.
Hermon Prison, where Rabin was incarcerated for 14 months.Credit: Wikipedia

It’s morning in southern Israel and the top people at a certain publicly traded company are gathered for a seminar on law and the markets. The company’s lawyers take the dais and toss around terms like ethical code. Everybody pays close attention – to their smartphones. Only when Zvika Rabin takes the stage do they wake up (and start exchanging jokes). He is the personification of why they should turn off their damn phones and pay attention.

“Seven years and two months ago, I got a phone call from the Israel Securities Authority,” Rabin begins. “They told me to come over. I said I had meetings. They said I didn’t understand my position and that I should come now. I did, and stayed for four days. On January 29 I was convicted of giving insider information to others who bought shares, and buying shares myself. I did 14 months in Hermon Prison.”

Maybe his story will help future brokers avoid the pokey, because what’s for sure is that deterrence doesn’t work, Rabin says: “Just look at TheMarker today. Page 1 reports that Haim Katz was questioned by the Israel Securities Authority [also on suspicions related to insider information]. Page 2 reports that Joshua Zoller, former chairman of the DS-Apex brokerage, was convicted of giving inside information to an associate.”

Later Rabin shared some hair-raising stories from his time in prison. “Twice during my incarceration I had to go from Hermon Prison to Jerusalem, to court. Each journey took three days: one day from Hermon Prison to Ramle Prison, second day from Ramle Prison to Jerusalem and back, and another day to return to Hermon Prison. All this traveling is in a police truck for transporting prisoners. The first time, I’m sitting in there, handcuffed and suddenly they load on 30 handcuffed people illegally in Israel, half of whom have been sentenced to life. It’s just me and them, no guards. The second the truck started to move, they took off each others’ handcuffs and started walking around freely, leaving only me cuffed one asked if I wanted my cuffs off. I said no.”

He complained about this but, Rabin says, it didn’t change much because three months later the same thing happened.

If life gives you a truckload of lemons, make lemonade. That’s what Rabin is trying to achieve with his lecture series: making something out of the trouble he made for himself six years ago. He also has a sideline in helping businessmen convicted of white-collar crime prepare for prison – and is working on relaunching the public-relations and investor relations business he had to close in 2014, which he has renamed “Emet” – truth.

Business takes off for Rabin

Rabin, 50, began his career as a portfolio manager about 25 years ago, then in the early 1990s worked for Haaretz for five years as a markets reporter. He left journalism in the late 1990s and set up the online company eTrade in Israel, but in 2001 lost the franchise and spent two years unemployed. In 2003 he set up his public relations and investor relations company.

Rabin, in short, lived and breathed the markets, which helped him build his business quickly. By 2009 he had several dozen clients and maintained offices on a high floor of a Tel Aviv tower. He had 10 employees and life smiled upon him. His proudest achievement was being hired by Teva Pharmaceutical Industries to handle its PR and IR. When he was arrested, his roster consisted of 70 companies, including Teva. He was earning millions of shekels a year.

“The arrest finished me,” he says. “Just the trial cost me 2 million shekels and then there are auxiliary costs. Sitting in prison for 14 months without salary is a lot of money. People don’t understand that the one who get punished isn’t the prisoner, it’s his family. The prisoner lives well. He has a great time and the wife and kids suffer. The judges don’t get that.”

His daughters visited as much as possible, Rabin says, and it was during his prison term that he married his second wife.

Economic robbery

Public relations is the art of making a company look good in the media. Investor relations involves the company’s marketing itself to investors, chiefly to the institutional investors that manage the public’s money. Working in IR, Rabin was in the secret of big deals in the making and financial statements before anybody else knew them. He was involved in decisions about how to market these things, and was charged with abusing this insider information to buy shares in three technology companies he represented: Evogene, Aladdin and Alvarion. He also recommended to his associates to invest in these three.

Rabin wound up convicted by Judge Khaled Kabub on 48 charges, was sentenced to two years and did 14 months. His case was one of many as the Israel Securities Authority stepped up enforcement.

Kabub, the terror of white-collar criminals nationwide, did not spare Rabin the lash of his tongue during sentencing, saying, “Rabin crassly, methodically and over time, exploited inside information he received moments before its publication at the expense of other investors.” His behavior was an extreme example of how not to behave in the markets, Kabub wrote, and the excuses he tried to make were better off unheard.

A lot of people would agree with Kabub that the market is a rigged game, not fair at all, and that only insiders can win. Everybody wants the winning horse and that’s what Rabin gave his clients: “In jail, when they asked me what I had done, I said I was here for economic robbery. They’d ask, what is economic robbery? Who did you rob? And I would say, ‘the nation.’”

Even now, two years after his conviction, his attitude toward the crimes he committed remains complex. He seems to want to admit that he erred, yet at the same time not to retreat from the line of defense he presented in court, which Kabub categorically rejected. He shows us the graphs he presented in court, showing how the shares in the companies he illegally traded in performed. The graphs are covered in arrows that were supposed to show the judge that the logic behind the trade in shares was based on the market, not particular inside information.

Mainly he kept repeating that he personally did not profit from the acts for which he was convicted. “Let me explain where I got into trouble. I prepared a nine-hour PowerPoint presentation for Judge Kabub. When I started talking he turned to face me for the first time since the trial had begun. I felt he might have understood he was dealing with a human being. In hindsight, it wasn’t so.”

Are you another wrongly convicted prisoner? All prisoners in jail are innocent.

“I didn’t say that. Today I understand that the judge was right in some of the cases, and I shouldn’t have traded in my customers’ shares. That’s clear to me. I didn’t understand the law the way the court understands and sees it.”

When did you realize you were entangled in criminal acts? When the Israel Securities Authority called?

“No, a year before, two days after I bought Evogene shares. The share shot up and I realized they’d see it. I consulted with two lawyers about what to do – go to the ISA and state it, or shut up. Both gave me the same bad advice – to shut up. I should have driven straight to the ISA’s office in Jerusalem that day.”

How would that have helped?

“My case would have been closed. When investigators are in your computer, searching it, you don’t know what they’ll find there. They found correspondence with friends where they called me ‘Godfather’ and ask ‘Godfather, what should I buy?’ and I’d answer. All this came out later at the trial. You don’t understand what they made of me.”

You’re supposed to obey the rules of the market, to promote the company in the press and make sure that investment managers understand the company. Not to work with friends.

“Then I should shut up?”


“Then you understand I would have no work?”

A friend who buys a share for 20,000 shekels because you recommended it – that’s not your job. Your job is to work with institutional investors.

“And you think the institutional investors aren’t like that? They were constantly calling me and even if I said ‘I’m not talking,’ they’d press for information.”

In court, Rabin argued that he’d been in the business since 2003 and had thousands of opportunities to learn inside information, and if he had wanted to commit crimes, he wouldn’t be sitting there now, but with $60 million in Costa Rica. But the judge, Rabin says, wrote that he was an “insider information industry.”

He started using inside information in 2008 because the market was falling apart after the collapse of Lehman Brothers. “One Sunday the market crashed, losing 25%. I withdrew savings to buy shares I thought, who would convict me for buying shares in a crashing market?”

OK, the market collapsed, but why buy shares in the companies that are your customers?

“Why not? I know these companies. If a share like Aladdin fell 70%, why shouldn’t I buy it? Understand me. I knew that inside information is information that influences the share price. If the market is down 70% like in 2008, what inside information is relevant here? The judge said, ‘You bought shares before a financial statement, you knew the figures in the report – you’re guilty.’”

In his lectures, Rabin directs the audience how to behave throughout the process. He wants to help them avoid the types of offenses he committed, but also explains how to behave under investigation, in order to minimize the damage.

You’ve said the first four days of interrogation by the ISA were the worst part of the whole period. Why? What kind of pressures did they use on you?

“The first day of questioning started at 11 AM and ended at 2 AM. The others started at 11 AM and ended at 6 PM. The pressures were by every means possible – yelling, violence, curses, lying to you, playing good cop, bad cop. They say, ‘We’re not writing what you say,’ but they do. The investigators are very good at what they do.”

You also say the best thing to do under questioning is to stay mum. Sounds simple.

“It’s almost impossible to stay silent under interrogation. They usually warn you, ‘If you don’t talk, we’ll do this or that to you, go to your wife, your friend already squealed.”

What did you try to achieve by talking?

“It’s moronic to think that staying silent will work against you. In practice there is nothing to gain by talking. If you have what to say, say it in court.”

You also recommend to people who want not to talk under questioning to bring a book of Psalms and read it. You also say you learned Torah in prison.

“I did not find religion, but I did learn Torah in prison.”

Why not study physics? Philosophy?

“That’s not an option. Jail enables you to work in your free time, or to teach if you’re a high-quality prisoner, or to study Torah. At age 48, I preferred to sit with 10 guys and study Torah four or five hours a day.”

What else do you do? Is there something you started to do that you hadn’t done before?

“Nothing specific. I did sport and read. I didn’t watch TV and didn’t play backgammon. Anyway, I’m a sleepyhead. I’d nap for an hour and a half at noon and went to bed every night at 8:30, and would sleep through to 6 the next morning.”

How do you prepare white-collar criminals for jail?

“I meet with them, explain what’s going to happen, how to conduct themselves, what to bring.”

Do they pay you for this briefing?

“I don’t take money. I help people. I hurt for these people going to jail. It hurts me that people fall all the time. It hurts me to see it constantly happening. I hope my lecture makes people keep their mouths shut and keep out of trouble.”

What are you invested in today on the stock market?

“I’m not touching a thing. I’m waiting for the crash. It will come. It’s a matter of time.”

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